(the following was accidentally posted in the wrong section yesterday.  This was posted 6/2 and a new post should follow shortly for today)


In A Word:

Despite some stronger than expected scheduled economic reports (which are normally bad for mortgage) , MBS (mortgage backed securities), the bonds that directly dictate mortgage pricing are doing well today, which had led to improved mortgage rates over Friday.  There is no other economic data scheduled for release today, but an action packed week is coming up with the incredibly important employment report on Friday.

To Lock or Float?

Indicators are mixed.  Normally, we would want to lock as rates worsened appreciably last week.. Indeed, if you have a price-sensitive transaction, locking still makes sense, but we are seeing some signs to float as well.  The Dow is down, and treasuries are performing well in addition to the MBS).  As long as the Dow stays in that negative territory and we dodge any further negative headlines, floating can still make sense if you believe the rest of the week's data will be weak.  Although, historically we are still in great territory, and anything that causes stocks to rise can cause mortgage rates to rise as well.  By the time you see stocks rising, it may be too late.  So proceed with caution. 

The Numbers:

30 year fixed rates should be available today, for the best qualified scenarios in the high 5 to low 6 range.

The News:

  1.  Manufacturing data
  • This came in slightly better than expected, but was still showing "contraction" overall.  The data did not help stocks which are down on the day, nor did it phase mortgage rates in their march lower
2.  Construction Spending
  • This report also, came in better than expectations but still negative overall.  The residential housing component of this report is acting as the biggest drag.
3. Shake Up at Wachovia
  •     Wachovia's CEO was fired.  Their stock has plummeted to its lowest level in over 10 years.  In general, because of Wachovia's size, bad news for them creates fear for others.  full story 

On Tap For The Rest Of The Week:


    - Factory Orders, another measure of how manufacturers may be gearing up for future productivity


    - ADP EMPLOYMENT REPORT, this measures job growth or loss in the private sector and is not given nearly as much credence as Friday's report

    - PRODUCTIVITY AND COSTS Report.  This report speaks to inflation conditions.  The higher the labor costs are, the higher the indication of inflation, which is bad for mortgage rates.

    - Non-Manufacturing Index, which measures business expansion or contraction in non-manufacturing industries.  Worse than expected can be good for mortgage rates.

    - Oil Inventories.  This does not directly affect mortgage rates, but if oil is significantly more or less plentiful than expected, it will effect crude oil prices which seem to have a much greater than normal effect on markets these days.  If this report causes stocks to rally, it could hurt mortgage rates.


    - JOBLESS CLAIMS, which is a weekly report of how many new applicants have come forward for unemployment benefits.  The more jobs lost, the better for mortgage rates.


    - EMPLOYMENT SITUATION.  This is a hugely important monthly report that tracks "non-farm" payrolls which is the most closely watched indicator of the labor market.  The lower the number, the better for rates.


We are right in the "middle ground" between the recent historical highs and lows of mortgage rate trading ranges.  This is dangerous because we were near the highs (highs in price that is, which means low rates) last week which can cause the risk that we will have to regress to the lows to be higher.  Still, we are basically looking for weak economic data.  If there is little enough economic activity and weak enough employment numbers, it can lead to improving mortgage rates this week.  But it could go either way.  The safe bet is always to lock if you can live with today's rate.  If you are convinced the data will be weak, floating is a gamble that may pay off.